Ashford's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Ashford Hospitality Trust, Inc. (AHT)

Q2 2012 Earnings Call

August 2, 2012, 11:00 a.m. ET


Scott Eckstein - Financial Relations Board

Monty Bennett – CEO

Douglas Kessler – President

David Kimichik - CFO & Treasurer


Ryan Meliker – MLV

Nikhil Bhalla – FBR

David Loeb - Robert W. Baird

Will Marks – JMP Securities

Robin Farley – UBS



Good day ladies and gentlemen. Thank you for standing by. Welcome to the Ashford Hospitality Trust second quarter 2012 conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday August 2, 2012.

I would like to turn the conference over to Scott Eckstein with Financial Relations Board. Please go ahead, sir.

Scott Eckstein

Good day, everyone, and welcome to Ashford Hospitality Trust conference call to review the company’s results for the second quarter of 2012. On the call today will be Monty Bennett, Chief Executive Officer; Douglas Kessler, President; and David Kimichik, Chief Financial Officer.

The results as well as a notice of the accessibility of this conference call on a listen-only basis over the internet were distributed yesterday afternoon in a press release that has been covered by the Financial Media.

At this time, let me remind you that certain statements and assumptions in this conference call contain are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the section entitled “Risk Factors” in Ashford’s Registration Statement on Form S-3 and other filings with the Securities and Exchange Commission. The forward-looking statements including this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company’s earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on August 1, 2012, and may also be accessed through the company’s website at Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.

I will now turn the call over to Monty Bennett. Please go ahead, sir.

Monty Bennett

Thank you and good morning. We are pleased to report a solid recovery in our RevPAR for the second quarter with growth, 7.3% for hotels not under renovations in our legacy portfolio, and RevPAR growth of 7.6% for hotels not under renovation in our Highland portfolio.

Additionally, our adjusted EBITDA of 98.4 million reflect a 10% growth over the prior year. On a capital market side of our business, we continue to be conservative with our conditioning and utilization. Our capital strategies include optimistically utilizing our preferred equity aftermarket offering, refinancings and asset sales.

With respect to transactions, finding accretive hotel investments is currently challenging for us. Although we are actively underwriting opportunities, the acquisition market is very competitive for high quality hotels.

At our current share price, we find it unattractive to pursue most investment in the United States or in Europe. Our share price will need to materially increase before potential acquisitions become attractive, especially those in Europe.

With among the high percentage of insider ownership of 20%, I can assure you that we remain [inaudible] focused on strategies to increase total shareholder returns.

Overall, lodging fundamentals remain strong, DS hotel market is performing exceptionally well despite the choppy global backdrop of a sluggish U.S. economy and the overhang of the dark clouds in Europe on many economic, social and political matters. All the data we’ve gathered supports our expectation of a prolonged, upward trend in lodging fundamentals that we believe is conducive for substantial long-term growth and appreciation.

In fact, PKF hospitality research recently affirmed its strong forecast of RevPAR growth, projecting RevPAR for U.S. hotels will increase 6.6 in 2013, and 7.8% in 2014. As a result, we are very bullish on the upside potential of this lodging cycle.

We believe this remains a very appealing time to invest in lodging stocks. We are still early in the cycle, perhaps about a third to a half of the way through, what we seek to be an extended period of growth.

Additionally, we expect history to repeat, mainly that this lodging cycle peak will exceed the prior peak in terms of RevPAR, EBITDA and hotel values.

A key driver for this healthy lodging recovery is the lack of new supply. Construction financing for lodging remains very difficult to obtain. While we have commented on this favorable demand, supply and balance before, the significance cannot be under estimated. The forecast for PKF in this regard have remained unchanged, projecting new supply growth for 2012, 2013, and 2014, a .5%, 1.0%, and 1.6% respectively.

New supply is expected to remain on average well below 2% annually, through at least 2016, which is less than the average annual change in the nations lodging supply, from 1988 through 2011.

For the foreseeable future, U.S. hotel demand is expected to significantly outpace available supply. If you consider that lodging is already reaching peak demand levels in many submarkets, the absence of new hotel rooms coming on in that market, should lead it to high room rates.

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